Welcome back to yet another exciting post on Process Facilitation. Today I will start a small series for Entrepreneurs. As usual you will find all the basics that you need to know. Or at least I think it in this way. I will going to explain one model which now you can guess. Business Model Canvas BMC is a popular model for many companies and by a single search on internet will give you many studies and ways this model can help you. Many of you probably already know this model and for you it can be a refresher course and I would love to get your feedback on this. The new comers this will help you get started or at least a starting point. Later you can go back and read the rest of the posts. oh and don’t forget to give me your feedback. I am thinking in this post I will tell you about the Model and in the next post I will give you something may be a project to work on and of course you can choose your own project and If you are about to open a company than this is a perfect opportunity for you to work on.
Business Model Canvas BMC
This Model is presented to us during my studies by my Facilitators so if anybody wants to say thank you please go to hyperisland.se and do so. I will show you how it looks like but first lets see What can it be used for?
- To design a new business model.
- To describe and visualize an existing business model.
- To modify an existing business model.
It is now clear to us on where and when we can use this Model. You can use it while starting a new business or you can use it to modify already existing Model. And if you are presenting a business plan of yours to someone else than you can use this model to show your plan. Amazing! isn’t it?
Some of you at this stage might be thinking what is business model? We came up with some of the definitions and I am going to share them with you. Look at them and then try to come up with your own thoughts and definitions.
- A business model describes how an entity organizes itself to create value and derive revenue.
- A business model describes how an organization creates, delivers, and captures value.
So basically: it’s about
- organisation structure
- customer value
- and money
This Model is divided into many parts and now we will discuss them in detail one at a time. Also in the images below you can see the overall look of the canvas.
We are going to start with the top right hand side which is Customer Segments, and we will go on discussing all the sectors. In a way we will combine all the sectors to one another thus creating a whole model.
CUSTOMERS SEGMENTS
The very first thing you need to think of is about your customers and who are they? what are their needs? It is all about Value. Remember about content and process method and what and why. It is about why. If you understand WHY you are good to go ahead. Otherwise I strongly suggest to go back and read about it here. I will try to keep it short and that is why I am thinking only to give you questions to think about in this Model and you can answer those questions to get an idea of your company and where are you standing right now?
In this phase you need to look at these questions as your starting point:
- For whom are we creating value?
- What defines a customer segment?
one answer to this might be: They have common needs and behaviors.
Also you need to look at different markets like
- mass market
- niche market
- segmented market
- diversified market
- multi-sided market
I am sure I don’t have to define these markets. you have Google now. 🙂 Moving along while thinking about markets and customer needs you also need to think about diversified thinking of customers. If one customer wants one thing another customer is thinking a totally opposite need. So what are you going to do? The one way is to think about WHY again and you may also take these points in consideration:
- their needs require different solutions.
- they are reached through different channels or networks.
- they require other relationships.
I know what you are thinking right now, these are not the solutions. Yes, they are not solutions, it is not my job. It is my job to give you questions to think about and guide you towards your goal. To reach at your goal you need to work on it and these questions are here to help you move along the path. in a group when you discuss these questions you are going to get responses and then analyze them. This is the way to do it. For example just take a last point about relationships with the products. Discuss it with your group and see in regard to your product what other products are their in the market and research other relationships that are already built and then think of solutions on how you can introduce yourself and your product and build new relationships.
Remember not to go ahead of time and stick to one phase in a given time and place. Like right now we are only talking about segments and nothing else so in your groups just talk about markets and segments. Next we see Value Propositions.
Value Propositions
You are in a next phase of Business Model Canvas. You have already decided of your Market and it is now time to work on Value. You need to think of
The products and services that create value for a specific Customer Segment.
This is a very important segment of the Model. People often forget why they are in the business to begin with. It is WHY that you need to be thinking right now. I would highly recommend you guys to watch Simon Sinek’s talk on How great leaders inspire action below.
Now that you have seen the video and recalled what is the difference between WHY and WHAT so we can continue and see some of the questions that you can think of during this stage.
- What Value do we deliver to the customer?
- Which of our customer’s problems are we helping to solve?
- Which customer needs are we satisfying?
- What bundles of products and services are we offering to each Customer Segment?
After working on these questions and many more that you should think of during the process you are ready to move forward and start working on Channels.
Channels
The basic idea of Channel is to find a way to bring your values to the customers.
- How a company reaches and communicates with its Customer Segment to deliver a Value Proposition
You can see that the Model is now shaping up nicely and you are seeing a bigger picture. Let us see some of the areas you need to consider. There are different types and functions you need to work on.
Types
- communication channels
- distribution channels
- sales channels
Functions
- bring awareness
- sell/purchase
- deliver customer value
- support after sale and so on…
I think you got an idea therefore, i don’t have to explain it in detail and keep this post short. Finally some of the questions that might raise during this stage are:
Through which channels do our Customer Segments want to be reached?
- How are we reaching them now?
- How are our Channels integrated?
- Which ones work best?
- Which ones are most cost-efficient?
- How are we integrating them with customer routines?
Finally, you should also consider these terms while working on Channels. The terms like Awareness, Purchase, Delivery and After Sales. After this the next stage is Customer Relationships.
Customer Relationships
This is very important and fragile area and you as Producer must be very careful. Once a customer is angry or dissatisfied with your services, products you are in trouble. You need to think of the following issues and really spend some time thinking about them. The issues are choices that you make in order to improve your relationships. Thus you need to consider if you want to give your customers Personal Assistance or Dedicated Personal Assistance. Similarly you want to use a Self-Service methodology or Automated Service for your customers. And last but not least you want to work with already existed communities or you want to co-create communities of your own. Think about these issues and any other issues that comes up during your discussions in the group and try to reach to some conclusions.
Also to help you get started her are some questions.
- What type of relationship does each of our Customer Segments expect us to establish and maintain with them?
- Which ones have we established?
- How costly are they?
- How are they Integrated with the rest of our business model?
Okay now, sit back and take a look at what you have done so far. You have done one part of the Canvas Model. Be proud at your self and if you want to have a break at this point I will not mind. Go ahead and drink a cup of coffee and stretch your legs. There is so much to do right now. Take 5-10 minute break and then come back.
Next we will look at the Key Resources.
Key Resources
Key Resources can be owned, leased or acquired from partners. You may think of many different resources but her I want to take a look at few of those. These are categorized as Physical, Financial, Intellectual and Human resources. Lets us see what does this mean.
Physical
I am going to give you key words here. This post is getting longer and I want to finish it in a reasonable length. so consider these points and discuss about them in your group discussion.
- buildings
- machines
- vehicles
- sales-systems
- distribution networks
Next we are going to look at
Financial
- cash
- credit
- stock option pool
Intellectual
- patents
- copyrights
- databases
- brand
Human
- experience & skill
especially in:
- knowledge & creative industries
And I have some more discussion questions for you to get started on this section. You can start discussing these:
- What Key Resources do our Value Proposition require?
- Our Distribution Channels?
- Customer Relationships?
- Revenue Streams?
The list goes on here. The important thing to remember here is to discuss as much as you can and listen to everybody. Next we will take a look at Key Activities.
Key Activities
Key activities are the most important things to do in order to create and offer a Value Proposition.I have divided Key Activities into levels and now we will take a look at those levels. Again I am only sharing key words and you are advised to discuss them in your groups.
Pre-production
- research
- planning
- preparation
Production & Delivery
- producing material
- education, tutoring
- interaction with students
Evaluation & Feedback
- correct tests
- feedback to students
- quality assurance of education
Other
- administration
- marketing
- networking
Take you time in discussing these terms and also look back at the previous work that you have done so far and see you could understand where you are going. And if you can see a trend in your findings. Business Canvas Model should be clear by now. Now let us see some discussion questions.
- What Key Activities do our Value Proposition require?
- Our distribution Channels?
- Customer Relationships?
- Revenue Streams?
You might feel that the above questions are being repeated and its a mistake. No, it is not a mistake and they are here because the context here is different and once you start discussing them you will know by yourself.
Next we are going to take a look at our Key Partners.
Key Partners
There are always partners involved in any successful business. You like it or not that’s the way it goes. Here you can look at the ways you can partner with someone. Now, these are just the starting points and I am sure you will have much more to discuss.
We looked at three main reasons to start a Partnership and I am going to share those three with you. To get started take a look at the three main reasons for partnerships:
- optimization
- reduction of risk
- acquisition of resources and activities
Take a look at these and also discuss them within your groups. Also add the following types of partnerships into your discussion. Some types with key points are
strategic alliances
- between non-competitors
coopetition
- strategic alliances between competitors
joint ventures
- to develop new businesses
buyer – supplier
- relationships
Also have look at some questions to get started with the discussions.
- Who are our Key Suppliers?
- Which Key Resources are we acquiring from our partners?
- Which Key Activities do partners perform?
Okay, after discussing these courses you can take another break of 15 minutes and refresh your minds.
Oh! you are back before 15 minute. I like you guys. You are good readers. Lets see what we have got next. Next is about Revenue Streams.
Revenue Streams
Here you are going to see about your profit areas. Are you excited. Now you will see your money. 🙂
You all know the when you deduct your Cost from your Revenue you get Profit. So keeping this simple maths in mind let us take a look at some revenue streams or pricing mechanisms. Please discuss the following key terms in your groups.
Asset Sale
- selling copies of a physical product
Lending, renting or leasing
- Expenses for a limited time compared to ownership.
Usage fee
- The more a service is used, the more the customer pays.
Subscription fees
- Selling continuous access to a service.
Licensing
- Permission to use protected intellectual property.
Brokerage fees
- Commission.
- Percentage on transactions.
Advertising
- Your product promotes other products or services.
After discussing these terms also take a look at these questions.
- For what value are our customers really willing to pay?
- For what do they currently pay?
- How are they currently paying?
- How would they prefer to pay?
- How much does each Revenue Stream contribute to overall revenue?
Lastly we are going to go through Cost Structures.
Cost Structures
In simple words it means to create and deliver value, maintain customer relationships and generate revenue incur costs. There are Fixed costs and Variable Costs.
Fixed costs
- The price remain the same despite the volume you produce.
Variable costs
- Costs vary proportionally with the volume produced.
Also consider this while discussing
- Is the business primarily Cost-driven or Value-driven?
- What are the most important costs inherent in our business model?
- Which Key Resources are most expensive?
- Which Key Activities are most expensive?
I have two more images of the model for you. Have a look at see if you could understand what is going on with them. I think at this point they are self explanatory and that is why I am leaving the interpretation of these images on your imagination. And feel free to tweak it and send me the tweaks.
That is it my friends. You have completed the whole Model in one day. Share your experience with me and tell me what did you create. Tell me about your discussions. How many of you did reflections and feedback? Well share anything that made you angry, passionate and motivated you? How much your group helped you or you helped your group? Tell me about group dynamics.
//Imran